G.R. No.

166282 February 13, 2013

HEIRS OF FE TAN UY (Represented by her heir, Mauling Uy Lim)
vs.
INTERNATIONAL EXCHANGE BANK
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G.R. No. 166283
GOLDKEYDEVELOPMENT CORPORATION
vs.
INTERNATIONAL EXCHANGE BANK

By: Kenneth David

FACTS:

From June 23, 1997 to September 3, 1997, respondent International Exchange Bank (iBank), granted loans
to Hammer Garments Corporation (Hammer), covered by promissory notes and deeds of assignment,
amounting to P24,938,898.08
On March 23, 1996, between iBank and Hammer, represented by its President and General Manager,
Manuel Chua (Chua) a.k.a. Manuel Chua Uy Po Tiong, granting Hammer a P 25 Million-Peso Omnibus Line.
The loans were secured by a P 9 Million-Peso Real Estate Mortgage executed on July 1, 1997 by Goldkey
Development Corporation (Goldkey) over several of its properties and a P 25 Million-Peso Surety
Agreement signed by Chua and his wife, Fe Tan Uy (Uy), on April 15, 1996.
As of October 28, 1997, Hammer had an outstanding obligation of P25,420,177.62 to iBank.
Hammer defaulted on its loans with iBank, which prompted the latter to foreclose on Goldkeys third-party
REM.
The mortgaged properties were sold for P12,000,000.00, which left a balance of P13,420,177.62.
On December 16, 1997, iBank filed a complaint for collection for sum of money against Hammer, Chua, Uy,
and Goldkey before the RTC Makati.
Chua and Hammer were in default for not filing an answer.
Uy on the other had claimed the defense that she was not liable to iBank since she never executed a surety
agreement in favor of iBank.
Goldkey, denied liability also on the ground that it acted as a third-party mortgagor and that its corporation
was separate and distinct from Hammer.
iBank filed for a Writ of Preliminary Attachment, which was latter granted.
The RTC ruled in favor of iBank, but pronounced that the signature of Uy was forged. However, the lower
court also held that Hammer and Goldkey were one and the same entity. Hence, the piercing of the veil of
corporate fiction was granted.
The CA affirmed the ruling of the RTC

ISSUES:

1. Whether or not Uy can be held liable to iBank for the loan obligation of Hammer as an officer and
stockholder of the said corporation.
2. Whether or not Goldkey can be held liable for the obligation of Hammer for being a mere alter ego of the
latter.


RULING:
The petitions are partly meritorious.

First Issue

No, Uy is not personally liable to iBank as an officer and stockholder of Hammer. The court found that her
signature on the said surety agreement was forged. Basic is the rule in corporation law that a corporation is a juridical
entity which is vested with a legal personality separate and distinct from those acting for and in its behalf and, in
general, from the people comprising it. Following this principle, obligations incurred by the corporation, acting through
its directors, officers and employees, are its sole liabilities. A director, officer or employee of a corporation is generally
not held personally liable for obligations incurred by the corporation. Nevertheless, this legal fiction may be
disregarded if it is used as a means to perpetrate fraud or an illegal act, or as a vehicle for the evasion of an existing
obligation, the circumvention of statutes, or to confuse legitimate issues.
Before a director or officer of a corporation can be held personally liable for corporate obligations, however,
the following requisites must concur: (1) the complainant must allege in the complaint that the director or officer
assented to patently unlawful acts of the corporation, or that the officer was guilty of gross negligence or bad faith;
and (2) the complainant must clearly and convincingly prove such unlawful acts, negligence or bad faith.
Sec. 31. Liability of directors, trustees or officers. Directors or trustees who wilfully and knowingly vote for or assent
to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of
the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees
shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or
members and other persons.

Considering that the only basis for holding Uy liable for the payment of the loan was proven to be a falsified
document, there was no sufficient justification for the RTC to have ruled that Uy should be held jointly and severally
liable to iBank for the unpaid loan of Hammer. Neither did the CA explain its affirmation of the RTCs ruling against
Uy. The Court cannot give credence to the simplistic declaration of the RTC that liability would attach directly to Uy
for the sole reason that she was an officer and stockholder of Hammer.

Indeed, there is no showing that Uy committed gross negligence. And in the absence of any of the
aforementioned requisites for making a corporate officer, director or stockholder personally liable for the obligations of
a corporation, Uy, as a treasurer and stockholder of Hammer, cannot be made to answer for the unpaid debts of the
corporation.


SECOND ISSUE

Yes, Goldkey was a mere alter ego of Hammer. Goldkey must be treated as one and the same entity with
Hammer. The records clearly show that it was Hammer, of which Chua was the president and a stockholder, which
contracted a loan from iBank.

Under a variation of the doctrine of piercing the veil of corporate fiction, when two business enterprises
are owned, conducted and controlled by the same parties, both law and equity will, when necessary to
protect the rights of third parties, disregard the legal fiction that two corporations are distinct entities and
treat them as identical or one and the same.

The two companies were proved to be one and the same by the following:

1. Both corporations are family corporations of defendants Manuel Chua and his wife Fe Tan Uy. The other
incorporators and shareholders of the two corporations are the brother and sister of Manuel Chua (Benito
Ng Po Hing and Nenita Chua Tan) and the sister of Fe Tan Uy, Milagros Revilla. The other
incorporator/share holder is Manling Uy, the daughter of Manuel Chua Uy Po Tiong and Fe Tan Uy.
2. Hammer Garments and Goldkey share the same office and practically transact their business from the same
place.
3. Defendant Manuel Chua is the President and Chief Operating Officer of both corporations. All business
transactions of Goldkey and Hammer are done at the instance of defendant Manuel Chua who is authorized
to do so by the corporations.
4. The promissory notes subject of this complaint are signed by him as Hammers President and General
Manager. The third-party real estate mortgage of defendant Goldkey is signed by him for Goldkey to secure
the loan obligation of Hammer Garments with plaintiff "iBank". The other third-party real estate mortgages
which Goldkey executed in favor of the other creditor banks of Hammer are also assigned by Manuel Chua.
5. The assets of Goldkey and Hammer are co-mingled. The real properties of Goldkey are mortgaged to
secure Hammers obligation with creditor banks.